David Rosenberg: optimal asset mix to maximize risk-adjusted returns

[padlock]

Read an article by David Rosenberg claiming that the optimal asset mix to maximize Sharpe ratio consists of equal parts dividend stocks, long dated treasuries, and high yield bonds, plus a little bit of gold.

The article can be found here: https://ca.finance.yahoo.com/news/david-rosenberg-want-portfolio-maximize-110004537.html

Any thoughts on this?

 

[Out-to-Lunch]

Wow, they extended their analysis all the way back to 1990. How thorough of them.

 

[audreyh1]

Ha ha I won’t touch high yield bonds, long dated treasuries or gold.

 

[FREE866]

Ugh...that guy is such a blowhard....


just look at the headlines of other articles he did:

• David Rosenberg: Markets in denial as margins, profits and estimates decline
• David Rosenberg: A recession is coming to Canada in 2023 amid huge debt, housing bubble
• David Rosenberg: S&P 500 could drop as low as 2,500 before this bear market is finished

It's like one hysterical proclamation after the next....and now with this article hes trying to sound all intellectual. Investing isn't that complicated.

 

[padlock]

Thanks for the responses. My initial reaction was also one of skepticism, but I wasn't familiar with Mr. Rosenberg's previous work. Seems he's quite the alarmist.

 

[MichaelB]

David Rosenberg is well noted for his bearish views on the US and global economies and equities in general.

 

[Spock]

Ignoring the source, the suggested portfolio is very similar to Ray Dalio's All Weather Portfolio without the high yield bonds and different weights:

• 30% US stocks (VTI)
• 40% long-term treasuries (TLT 20+)
• 15% intermediate-term treasuries (IEF 7-10)
• 7.5% commodities, diversified (DBC)
• 7.5% gold (GLD)

https://en.wikipedia.org/wiki/Ray_Dalio

 

[RobLJ]

I was going to post a similar comment (or it is similar to the Permanent Portfolio). Rosie is usually bearish; quite bearish before the Great Financial Crisis, for which I thank him.

But I saw him on CNBC last week and he was arguing that the Fed is likely to stop raising soon. He advocates a bar-bell bond often. He will never advocate 100% equities, so if you're a 60-40 or 50-50 or less person he will be more your style.

He's a decent economist, though.

Ignoring the source, the suggested portfolio is very similar to Ray Dalio's All Weather Portfolio without the high yield bonds and different weights:

• 30% US stocks (VTI)
• 40% long-term treasuries (TLT 20+)
• 15% intermediate-term treasuries (IEF 7-10)
• 7.5% commodities, diversified (DBC)
• 7.5% gold (GLD)

https://en.wikipedia.org/wiki/Ray_Dalio

 

[matjung]

Read an article by David Rosenberg claiming that the optimal asset mix to maximize Sharpe ratio consists of equal parts dividend stocks, long dated treasuries, and high yield bonds, plus a little bit of gold.
The article can be found here: https://ca.finance.yahoo.com/news/david-rosenberg-want-portfolio-maximize-110004537.html
Any thoughts on this?

What is best historically is not always best for the Future.
E.g. in addition to gold, one could also do silver, oil, cryptos, classic cars

 

[ncbill]

What is best historically is not always best for the Future.
E.g. in addition to gold, one could also do silver, oil, cryptos, classic cars

No kidding...30-year Treasuries were great investments back in the early 80s but no one then knew we were going to experience FORTY years of a declining interest rate environment.

I wouldn't buy the above given we're still in a rising interest rate environment.

 

[OverThinkMuch]

Sharpe ratio measures performance over volatility - if an investment has far lower volatility and somewhat lower performance, that's an improvement in Sharpe ratio. I'm not sure that works well in practice, as low volatility portfolios will seem like a waste in long bull markets... and the payoff is when that bull market ends. Nervous investors may have a lower volatility portfolio that includes more gold & bonds, but they can see stocks outperform for years and experience FOMO. They switch their portfolio within a few years of the top, and only during the crash feel they should have stuck with low volatility. The whole business cycle plays out over many years, which can allow investors to forget why they abandoned a low volatility portfolio in the prior cycle.